For long-term success, lawyers must combat the generous salaries, high-stress hours, and a culture of invulnerability that encourage excessive spending and lack of budgeting that can undermine financial stability.
If you’re reading this article, you probably already know that simply earning money now isn’t enough to keep you financially stable for the rest of your life. Planning your money —and planning with your money— is the only way to ensure that you’ll be spending comfortably over a long period of time.
So why is “budget” treated like a dirty word by so many lawyers?
After all, coming into the workforce with much higher salaries than our peers (albeit with loans to match), we certainly don’t have to worry that budgeting will mean too much by way of limitations. And yet, we meet too many first or second-year associates who have yet to start thinking about their financial plan. And as the busy lawyer already knows, your first few years fly by…and before you know it, you can be rounding off your fifth year at a law firm with a lucrative salary but without the savings you deserve.
We’ll let you in on a little secret:
Lawyers don’t budget because they think they shouldn’t have to. And that impacts their financial future.
If you find yourself thinking one of the common misconceptions below, it’s time to get yourself back on track and start thinking seriously about your money.
Myth #1: I’m Making Plenty of Money, I Don’t Need a Budget!
A budget does not mean cutting down on your spending or simplifying your lifestyle. All that creating a budget does is determine your income and expenditure–allowing you to track and plan where your money is coming and going.
For many new associates, going from the tight days of law school to a regular (comfortable!) salary feels absolutely liberating. With money coming in every month, it can be all to easy to ignore the pesky chores of budgeting your salary or making budget-friendly choices.
No matter how much money you’re enjoying now, ignoring your budget means ignoring your saving … for retirement, for rainy days, or even for your next big purchase. And if you let the the first handful of years pass you by, you’ve missed out on a valuable opportunity to save up a nest egg—limiting your career options and losing the financial freedom to change jobs, know your salary requirements, or grow your investments.
Myth #2: I Work Really Hard, I Deserve to Spend My Money!
For most of us, the law firm culture of “work hard, play hard” is a welcome upgrade from the all-work, no play mindset of law school. For some lawyers, creating a budget seems like a threat to the worry-free spending that they feel they’ve rightfully earned. And they’re not wrong, at least not entirely. The average lawyer is giving up a lot of comforts for their long workdays and high-pressure jobs, and living well can feel like due compensation.
You definitely should be spending your money. But not all of it, and not without a budget. With a bit of thought and planning, you can happily spend on vacations, lifestyle, and entertainment and still create a reasonable savings plan for your future. Your budget can be as limiting and permissive as you’d like it to be—as long as it helps you understand your finances today, and your financial status in the years ahead.
My #3: No One at My Firm is Budgeting!
For too many lawyers, part and parcel of establishing a professional reputation is promoting their appearance of status and invulnerability. In our highly-competitive workforce, the sense that we need to avoid showing weakness— combined with the feeling that our financial status determines our success— means few of us would willingly speak about financial constraints or planning.
Although we may show our investment savvy or financial know-how for our clients or in our professional specialty, there’s little room for associates to speak to each other frankly about personal financial issues—especially within larger firms. As a result, a junior associate could assume that no one is speaking about money because no one is doing anything more with their salary than eating it and spending it. In turn, that misconception encourages the sense that if aw lawyer is budgeting, they must be less successful…or simply not valuable enough to their firm to earn a comfortable enough compensation.
But just because no one’s speaking about it, doesn’t mean senior associates aren’t budgeting, planning, and investing just like you are. Getting caught up in what you think a lawyer should be doing—or feeling—will only hurt your financial stability in the long-term.
Wherever you are on your career ladder, now’s the time to get a handle on your budget—including income, expenditures, and debt repayment. The more you save, the better chance you have at building a stable financial future wherever you decide to go.
It’s time to start budgeting! Over the next two weeks, create a simple, easy-to-follow budget using an app or whatever makes it easiest for you. Commit to following it.